Is Solar Worth It in South Dakota in 2026?
South Dakota gets more sun than most people expect from a Northern Plains state — around 213 sunny days a year, and a well-sited panel near Sioux Falls produces about 1,371 kWh per installed kilowatt annually, respectable for this latitude (44°N). The problem isn't the sun. It's the electricity it's competing against: South Dakota power is cheap by national standards, about 13.4¢ per kWh in 2025, and cheap power means every kWh your roof makes is worth less than it would in a high-rate state.
Layer on 2026 reality: the 30 percent federal tax credit is gone for anyone buying a system outright, and South Dakota is one of only two states with no statewide net metering law. Together, that makes this a hard "yes" to earn. It can still work for a high-usage home on a good roof inside Xcel Energy's territory around Sioux Falls, where export compensation resembles true net metering. Outside that territory, you're negotiating with whichever co-op or municipal utility owns the wires, and the deal varies block to block. This page has the real numbers — not a salesperson's slide deck.
South Dakota Electricity Prices
Solar is a bet against future electricity prices — every kWh you generate is one you don't buy from the utility. So before panels, look at where South Dakota rates have actually gone. Here's the EIA history.
Full South Dakota electricity price data (1990–2025)
| Year | South Dakota (¢/kWh) | US avg (¢/kWh) |
|---|---|---|
| 1990 | 7.0 | 7.8 |
| 1991 | 6.9 | 8.0 |
| 1992 | 7.1 | 8.2 |
| 1993 | 7.0 | 8.3 |
| 1994 | 7.1 | 8.4 |
| 1995 | 7.1 | 8.4 |
| 1996 | 7.0 | 8.4 |
| 1997 | 7.1 | 8.4 |
| 1998 | 7.3 | 8.3 |
| 1999 | 7.4 | 8.2 |
| 2000 | 7.4 | 8.2 |
| 2001 | 7.4 | 8.6 |
| 2002 | 7.4 | 8.4 |
| 2003 | 7.5 | 8.7 |
| 2004 | 7.7 | 9.0 |
| 2005 | 7.8 | 9.5 |
| 2006 | 7.8 | 10.4 |
| 2007 | 8.1 | 10.7 |
| 2008 | 8.3 | 11.3 |
| 2009 | 8.5 | 11.5 |
| 2010 | 9.0 | 11.5 |
| 2011 | 9.4 | 11.7 |
| 2012 | 10.1 | 11.9 |
| 2013 | 10.3 | 12.1 |
| 2014 | 10.5 | 12.5 |
| 2015 | 11.1 | 12.7 |
| 2016 | 11.5 | 12.6 |
| 2017 | 11.8 | 12.9 |
| 2018 | 11.6 | 12.9 |
| 2019 | 11.6 | 13.0 |
| 2020 | 11.8 | 13.2 |
| 2021 | 12.2 | 13.7 |
| 2022 | 12.1 | 15.0 |
| 2023 | 12.3 | 16.0 |
| 2024 | 12.9 | 16.5 |
| 2025 * | 13.4 | 17.3 |
Source: US EIA, average residential retail electricity price. Values in cents per kWh. * 2025 is preliminary.
South Dakota residential rates have climbed about 72 percent since 2005, and roughly 1.9 percent a year over the last decade — a real increase, but from one of the lowest rate bases in the country, rising slower than the national average. That's the honest tension here: rising prices help solar's case everywhere, but South Dakota's low starting point means the same system pays back much more slowly than in a high-rate state like California or Massachusetts. If rates keep climbing near their last-decade pace, today's math looks a little better in ten years — but nobody can promise that.
The South Dakota Sun
South Dakota sits at 44°N — noticeably farther north than most solar-heavy states, which means a bigger swing between summer and winter sun angles and shorter winter days. Panels don't care about air temperature; they care about how high the sun climbs and how long it stays up.
South Dakota monthly solar production data
| Month | kWh per installed kW |
|---|---|
| Jan | 89 |
| Feb | 101 |
| Mar | 117 |
| Apr | 127 |
| May | 127 |
| Jun | 126 |
| Jul | 140 |
| Aug | 133 |
| Sep | 120 |
| Oct | 116 |
| Nov | 96 |
| Dec | 80 |
| Year | 1371 |
Source: NREL PVWatts typical-year estimate (Sioux Falls), per installed kW at latitude tilt.
The practical read: South Dakota's summer months carry most of the year's production, thanks to long June and July days that partly offset the lower sun angle. Winter output drops hard — short days, low sun, and occasional snow cover on the panels until it slides or melts off. That nets out to roughly 1,371 kWh per installed kW near Sioux Falls, solid for this far north, but it also means a South Dakota system leans harder on a handful of summer months to make its annual case.
What Solar Costs in South Dakota in 2026
Installed cost estimates for South Dakota cluster around $3.10 to $3.85 per watt in 2025–2026, per EnergySage and SolarReviews (some marketing sites quote $2.85 to $4.21 — treat $3.00 to $3.90/W as the realistic range). With no federal credit and no state sales tax exemption, the number you negotiate is essentially what you pay.
| System Size | Typical 2026 Cost | Roughly Offsets | Fits |
|---|---|---|---|
| 5 kW | $15,500 to $19,250 | ~6,855 kWh/yr (~$77/mo at 13.4¢) | Smaller home, lower usage |
| 8 kW | $24,800 to $30,800 | ~10,970 kWh/yr (~$122/mo) | Average South Dakota home |
| 12 kW | $37,200 to $46,200 | ~16,450 kWh/yr (~$184/mo) | Large home, electric heat or well pump |
Watch for stale marketing: several aggregator sites still advertise a "26%" or "30%" federal credit as available in 2026. That credit does not exist for a system you buy after 2025 — if an installer's quote assumes it, ask them to redo the math without it, and be wary of the rest of their numbers too.
Estimate Your South Dakota Payback
The calculator below starts from South Dakota's average residential rate and typical Sioux Falls-area production. Enter your own monthly bill to see an estimated system size, payback period, and 25-year outlook. South Dakota rates have risen about 1.9 percent a year over the last decade — a reasonable starting point for the inflation field, though you can drag it to test other scenarios.
South Dakota Solar Incentives That Still Exist in 2026
There isn't much left here, and what remains is shrinking.
- Gone — the 30 percent federal credit: The federal Residential Clean Energy Credit ended for installations completed after December 31, 2025, with no phase-out.
- No state income tax credit: South Dakota has no state personal income tax, so a state solar credit was never on the table — not a benefit that disappeared, one that never existed.
- No state sales tax exemption: Solar equipment and labor are taxed at the standard South Dakota sales/use tax rate, like any other home improvement.
- Partial, sunsetting — property tax exemption: Under SDCL 10-4-44, qualifying renewable energy systems are exempt from local property tax at 70 percent of assessed value or $50,000, whichever is greater. A 2025 amendment (S.B. 1) narrowed this to assessments dated before January 1, 2025, and the whole exemption sunsets January 1, 2027. A system assessed in 2026 likely doesn't qualify — confirm with your county Director of Equalization first.
- Partially — leases and PPAs: Third-party-owned systems can still capture a separate federal business credit through 2027, but it belongs to the leasing company, not you.
Some co-ops or municipal utilities run their own small rebate programs at their own discretion — there's no statewide list, so ask your installer and utility what applies to your address.
Net Metering — or the Lack of It — in South Dakota
This is what makes South Dakota unusual. Net metering credits you for extra power your panels send to the grid, typically close to the retail rate, so summer surplus can offset winter usage. Most states require some version of this by law. South Dakota does not — one of only two states nationwide (with Tennessee) with no statewide net metering mandate. The legislature has repeatedly considered and rejected mandating it, once concluding it was "not in the public interest."
Instead, PUC-regulated investor-owned utilities must only interconnect with and buy excess solar power at their "avoided cost" — the utility's own incremental generation cost, typically a low, wholesale-like rate well under retail. For systems under 100 kW that rate is filed with and approved by the state Public Service Commission, so it's at least public — but there's no statewide floor guaranteeing anything close to retail credit.
The bright spot is Xcel Energy, serving Sioux Falls and pockets of eastern South Dakota — fewer than 85,000 customers. Xcel voluntarily runs a program that functions like true net metering: monthly net excess generation rolls forward as a bill credit, and whatever remains at year end is either paid out at an avoided-cost-comparable rate or, by one-time election, carried forward indefinitely.
Everyone else — the state's 29 municipal utilities and 22 rural electric cooperatives, which together serve most of the state's land area — sets its own policy through its own elected board, with no state guarantee at all. Terms vary co-op to co-op. Call your specific utility before you buy a system and get their export-compensation rate in writing; it is the single most important number on this page, and it is not something any statewide chart can tell you.
How to Go Solar in South Dakota
Work through these steps in order.
- Call your specific electric utility or co-op first and ask for their written net metering or export-compensation policy. Do this before you talk to an installer — it changes whether solar makes sense at all.
- Pull your last 12 power bills and find your true annual average. South Dakota bills swing hard between a mild fall month and a brutal January heating bill or July cooling bill.
- Confirm your roof faces south, east, or west, gets minimal shading, and has at least 10 to 15 years of life left before you add panels to it.
- Get at least three quotes and make sure every one reflects 2026 reality — no phantom federal credit, no exaggerated state incentive.
- Ask your county Director of Equalization whether your installation would qualify for any remaining property tax exemption before the January 2027 sunset.
- Compare the honest payback number — likely 17 to 21 years inside Xcel territory, and longer or uncertain elsewhere — against how long you plan to stay in the home.
For the fundamentals of how solar systems work, sizing, and buying versus leasing, see our main solar panels guide. Pair that with our roofing guide before adding panels to an aging roof, and our electrical guide if you're also weighing a panel upgrade or backup battery.
Sources
Figures on this page are 2026-current. Electricity rates: US EIA, Electric Sales, Revenue, and Average Price (2025 values preliminary). Federal credit repeal: IRS — Residential Clean Energy Credit. Production estimates: NREL PVWatts. Net metering and compensation: South Dakota PUC Solar Energy FAQ and South Dakota PUC Compensation page. Property tax exemption: DSIRE Renewable Energy Property Tax Exemption (SD) and SDCL 10-4-44. Installed cost: EnergySage South Dakota Solar Panel Cost and SolarReviews South Dakota Solar Panel Cost. We review these figures every six months.